WorksheetsIEO practice 1
Total questions: 25
Worksheet time: 38mins
In a city, there are two car factories, Factory A and Factory B. Factory A can produce 100 red cars or 200 yellow cars per batch, while Factory B can produce 50 red cars or 150 yellow cars per batch. Which factory has the higher opportunity cost of producing one yellow car?
Both factories have the same opportunity cost
Factory A
There is not enough information to answer
Factory B
Which of the following accurately describes the concept of the “natural rate of unemployment” and its significance for monetary policy?
The rate of unemployment that can be achieved without causing inflation to rise
The lowest possible rate of unemployment an economy can achieve
The rate of unemployment that results from cyclical factors
The rate of unemployment targeted by central banks to maintain economic growth
What is the primary purpose of a central bank's open market operations?
To regulate the stock market
To control the money supply and interest rates
To provide loans to businesses
To manage the national debt
Which of the following is an example of an automatic stabilizer in the economy?
Tax cuts during a recession
Unemployment benefits increasing as more people lose their jobs
A government bailout for banks
Interest rate cuts by the central bank
Which of the following statements about investment decision making is
correct?
Opportunity costs are not relevant
The return on capital employed considers the time value of money
Capital budgeting is based on predictions of an uncertain future
A strength of the payback method is that it is based on profitability
In evaluating the impact of relative inflation rates on the demand for a foreign currency, which of the following is true?
Inflation is irrelevant to currency demand
As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency falls
As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency increases
As inflation associated with a foreign economy decreases in relation to a domestic economy, demand for the foreign currency falls
Which of the following factors is likely to impact the strategic objectives of a public sector body or organization more than that of a private sector organization?
The power of shareholders
Government trade policy
Overall government policy objectives
Government competition policy
Which of the following is not a principle of corporate governance?
Rights of shareholders
Board responsibilities
Auditor’s accountability and remuneration
Risk management and internal control
A person has been promising investors in their company a very high annual return on their investment. To fund these promised returns, the person has been taking money from new investors and using it to pay the high returns demanded by earlier investors. What type of fraudulent activity is the person committing?
Manipulating revenue reporting
Advance fee fraud
False invoicing
A pyramid-style scheme
Assume that initially the exchange rate is 1 USD = 1 EUR. A company in Europe sells a product to a customer in the United States for $1,000. By the time the customer pays, the value of the European currency has strengthened by 20% compared to the US dollar. What will the final amount the company receives in its local European currency be?
€416.67
€1,200
€833.33
€400
During a financial crisis, what potential risks can arise in the banking system?
Bank failures
Liquidity shortages
Deposit flights
All other options are correct
The data used to measure and make conclusions about economic inequality come from various sources. Mark the correct statement about these sources.
Sociological surveys are good at providing data about the income of the richest quintile of the population
The administrative data about taxes paid fail to accurately reflect the income of the poorest quintile of the population
The data about having a refigerator at home can provide a correct impression of economic inequality in developed countries
The data on received social security benefits can be used as a good proxy for income in whole distribution
Which of the following effects would be the result of introducing a quota on an imported good below the market-clearing quantity? Consider all markets to be perfectly competitive.
The domestic supply curve shifts downwards
The domestic demand curve shifts upwards
Some of the domestic consumers’ surplus transfers to the domestic producers
Importers’ profit decreases
The government is concerned with the existing trade deficit. In coordination with the Central Bank, it considers measures to alleviate the problem. Which of the following policies would help to achieve this goal?
Lowering prime interest rates
Tax deductions for exporting firms
Buying government bonds
All mentioned policies will help to achieve the goal
Let’s suppose that Catherine just lost her job and found a new one right away but at a lower wage rate. Based on the neoclassical theory for labor supply, the substitution effect of the lower wage for Catherine will lead her to:
work less hours than before
work more hours than before
work the same hours as before
exit the labor market and thus, supply zero hours of work
Which of the following is the most practical and effective policy to deal with carbon emissions caused by driving a car?
A quota on individuals to limit their driving
A subsidy to car sharing operators
A petrol tax
Nationalization of all car producers
Choose the correct statement about externalities:
When a person is vaccinated against COVID 19, it creates a positive externality in the future
If some action is associated with negative externality, it must be forbidden to achieve economic efficiency
Positive externalities increase efficiency, so markets with them should not be subject to government intervention
If externality appears in a monopolized market, the inefficiency is doubled and strict regulation is called for
Following the unexpected interest rate increase, the price of which of the following risk-free bonds will drop the most (in percentage to its pre-interest rate-increase price)
Long-term zero-coupon bonds
Long-term bonds with high fixed coupon rates
Short-term zero-coupon bonds
Short-term bonds with high fixed coupon rates
Economist G calculates income inequality in some real-world country based on the Gini coefficient and the pretax (gross) incomes of all households in the society. Economist D calculates income inequality in the same country based on the Gini coefficient and the disposable incomes of all households in the society. Which of the following is likely to be true?
G’s Gini coefficient is smaller than D’s
D’s Gini coefficient is smaller than G’s
The two Gini coefficients are the same
None of the other statements is true
Under which circumstances may setting the minimum wage increase employment?
Perfectly competitive labor market
Employers have market power in wage setting
Having heard about the minimum wage, new labor force immigrates
(assume perfectly competitive labor market)
None of the other answers is correct
Which of the following describes a flexed budget?
One that is set prior to the control period and not subsequently changed in response to changes in activity, costs or revenues
One that is continuously updated by adding a further accounting
period when the earliest accounting period has expired
One that is changed in response to changes in the level of activity
One that is changed in response to changes in costs
Universal Exports Co limits its operations to exporting overseas. Which of the following statements about Universal’s exposure to exchange rate risk is correct?
Universal is exposed to transaction, economic and translation risks
Universal is exposed to transaction and economic risks only
Universal is only exposed to transaction risk
Universal is not exposed to exchange rate risk as currency
fluctuations would balance out over time
Which of the following best explains the relationship between cryptocurrency and blockchain technology?
Cryptocurrencies are a type of blockchain.
Blockchain is a technology that enables cryptocurrencies to operate in a decentralized way.
Blockchain is a digital currency regulated by central banks.
Cryptocurrencies cannot function without being approved by governments.
An investor adds Bitcoin to a diversified portfolio of traditional assets. Which of the following best explains the potential impact on the portfolio's risk-return profile?
It reduces portfolio risk due to Bitcoin's stable price patterns.
It increases overall portfolio stability due to high regulation of cryptocurrency markets.
It may increase volatility but also provide potential for higher returns due to low correlation with traditional assets.
It guarantees capital protection in times of economic downturns.
Which of the following best describes a key financial risk associated with algorithmic stablecoins?
They are backed by central banks, making them vulnerable to interest rate changes.
Their value depends on physical commodities, which are difficult to verify on-chain.
Their peg to fiat currency can collapse during market stress due to the absence of collateral backing.
They are fully insured, which encourages reckless investor behavior.
